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Item 9A. Controls and Procedures

2022-06-27 compared with 2021-06-25 · 390 added, 365 removed, 820 unchanged (48% of the section changed)

CONTROLS AND PROCEDURES

Management’s

Annual Report on Internal Control over Financial Reporting.

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adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f).

The Company’s

internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of the consolidated financial statements.

Our internal control over financial reporting is supported by appropriate

reviews by management, written policies and guidelines, careful selection and training of qualified personnel, and a written Code of

Conduct adopted by our Board of Directors, applicable to all directors, officers and employees of Mexco.

Because of its inherent limitations, internal control over financial reporting

may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk

that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures

may deteriorate.

internal control over financial reporting is supported by appropriate reviews by management, written policies and guidelines, careful

selection and training of qualified personnel, and a written Code of Conduct adopted by our Board of Directors, applicable to all directors,

officers and employees of Mexco.

chief executive officer and chief financial officer assessed the effectiveness our internal control over financial reporting using the

criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 “Internal Control - Integrated

Framework”.

criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 “Internal Control - Integrated

Based upon that evaluation, our chief executive officer and chief financial officer concluded that our internal control

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in Internal Control over Financial Reporting.

No changes in the Company’s internal control over financial reporting occurred

during the year ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

“Mexco Energy Corporation Board of Directors”, “Named Executive Officers Who Are Not Directors”, “Section

16(a) Beneficial Ownership Reporting Compliance”, “Corporate Governance and Code of Business Conduct”

and “Meetings

and Committees of the Board of Directors”

in the Proxy Statement of Mexco Energy Corporation for our Annual Meeting of Stockholders

to be held September 9, 2021 (“Proxy Statement”) to be filed with the SEC within 120 days after the end of our fiscal year

“Mexco Energy Corporation Board of Directors”, “Named Executive Officers Who Are Not Directors”, “Section

16(a) Beneficial Ownership Reporting Compliance”, “Corporate Governance and Code of Business Conduct” and “Meetings

and Committees of the Board of Directors” in the Proxy Statement of Mexco Energy Corporation for our Annual Meeting of Stockholders

to be held September 13, 2022 (“Proxy Statement”) to be filed with the SEC within 120 days after the end of our fiscal year

ended March 31, 2022, which is incorporated herein by reference.

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EXECUTIVE COMPENSATION

information required by this item will be contained in the Proxy Statement under the caption “Executive Compensation”, and

is hereby incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

information required by this item will be contained in the Proxy Statement under the captions “Security Ownership of Certain Beneficial

Owners and Management”

and “Employee Incentive Stock Option Plans”, and is hereby incorporated herein by reference.

information required by this item will be contained in the Proxy Statement under the captions “Security Ownership of Certain Beneficial

Owners and Management” and “Employee Incentive Stock Option Plans”, and is hereby incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

information required by this item will be contained in the Proxy Statement under the captions “Certain Relationships and Related

Transactions”

and “Meetings and Committees of the Board of Directors”, and is hereby incorporated by reference herein.

information required by this item will be contained in the Proxy Statement under the captions “Certain Relationships and Related

Transactions” and “Meetings and Committees of the Board of Directors”, and is hereby incorporated by reference herein.

PRINCIPAL ACCOUNTING FEES AND SERVICES

information required by this item will be contained in the Proxy Statement under the caption “Audit Fees and Services”, and

is hereby incorporated by reference herein.

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Financial Statements.

For a list of the consolidated financial statements filed as part of this Form 10-K, see the “Index to

Consolidated Financial Statements”

set forth on F-1 of this report.

For a list of the consolidated financial statements filed as part of this Form 10-K, see the “Index to

Consolidated Financial Statements” set forth on F-1 of this report.

Statement Schedules.

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information requested is set forth in the consolidated financial statements or related notes thereto.

For a list of the exhibits required by this Item and accompanying this Form 10-K see the “Index to Exhibits”

For a list of the exhibits required by this Item and accompanying this Form 10-K see the “Index to Exhibits” set forth

on page F24 of this report.

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following are abbreviations and definitions of terms commonly used in the oil and gas industry and this report.

A large natural depression on the earth’s surface in which sediments generally brought by water accumulate.

One stock tank barrel, or 42 U.S.

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A line of credit provided by a bank or group of banks, secured by oil and gas properties.

Refers to depreciation, depletion and amortization of the Company’s property and equipment.

The number of acres which are allocated or assignable to producing wells or wells capable of production.

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under the terms of the lease.

Typically, the duration of the lessee’s authorization is for a stated term of years and “for

so long thereafter”

as minerals are producing.

Typically, the duration of the lessee’s authorization is for a stated term of years and “for

so long thereafter” as minerals are producing.

One thousand cubic feet of natural gas at standard atmospheric conditions.

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One million British thermal units of energy commonly used to measure heat value or energy content of natural gas.

gas liquids (“NGLs”) .

Liquid hydrocarbons that have been extracted from natural gas, such as ethane, propane, butane

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revenue interest.

An owner’s interest in the revenues of a well after deducting proceeds allocated to royalty and overriding

Crude oil or condensate.

The individual or company responsible for the exploration, development and production of an oil or natural gas well or lease.

royalty interest (“ORRI”).

A royalty interest that is created out of the operating or working interest.

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using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.

developed nonproducing reserves (“PDNP”) .

Reserves that consist of (i) proved reserves from wells which have been completed

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and analogous production in the immediate vicinity of the wells.

developed producing reserves (“PDP”).

Proved reserves that can be expected to be recovered from currently producing zones

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with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating

undeveloped reserves (“PUD”) .

Proved reserves that are expected to be recovered from new wells on undrilled acreage or

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of drilling or operating the wells on the leased acreage.

Royalties may be either landowner’s royalties, which are reserved by

the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of

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Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

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of Independent Registered Public Accounting Firm

of Directors and Stockholders

Mexco Energy Corporation

on the Financial Statements

of Directors and Shareholders

Energy Corporation

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Mexco Energy Corporation (a Colorado corporation) and Subsidiaries (the

Company) as of March 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’

and cash flows for each of the two years in the period ended March 31, 2021, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended

March 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the entity’s management.

Company) as of March 31, 2022 and 2021, and the related consolidated statements of operations, changes in stockholders’

equity, and cash flows for each of the two years in the period ended March 31, 2022, and the related notes (collectively referred to

as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of March 31, 2022 and 2021, and the results of its operations and its cash flows for each of

the two years in the period ended March 31, 2022, in conformity with accounting principles generally accepted in the United States

financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these financial

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We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

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we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

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(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved are especially challenging, subjective, or complex judgments.

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

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makes significant estimates and assumptions, including forecasting the production decline rate of producing properties and forecasting

the timing and volume of production associated with the Company’s development plan for proved undeveloped properties.

the estimation of proved reserves is also impacted by management’s judgments and estimates regarding the financial performance

the timing and volume of production associated with the Company’s development plan for proved undeveloped properties.

the estimation of proved reserves is also impacted by management’s judgments and estimates regarding the financial performance

of wells associated with proved reserves to determine if wells are expected, with reasonable certainty, to be economical under the appropriate

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principal consideration for our determination that the estimation of proved reserves is a critical audit matter is that changes in certain

inputs and assumptions, which require a high degree of subjectivity necessary to estimate the volume and future revenues of the Company’s

proved reserves could have a significant impact on the measurement of depletion expense or the impairment assessment.

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the Critical Audit Matter Was Addressed in the Audit

obtained an understanding of the design and implementation of management’s controls and our audit procedures related to the estimation

of proved reserves included the following, among others.

We evaluated the level of knowledge, skill, and ability of the Company’s reservoir engineering specialists and their relationship to the Company, made inquiries of those reservoir engineers regarding the process followed and judgments made to estimate the Company’s proved reserve volumes, and read the reserve report prepared by the Company’s specialists.

To the extent key, sensitive inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from the Company’s accounting records, such as commodity pricing, historical pricing differentials, operating costs, estimated capital costs and working and net revenue interests, we tested management’s process for determining the assumptions, including examining the underlying support, on a sample basis.

Specifically, our audit procedures involved testing management’s assumptions as follows:

evaluated the level of knowledge, skill, and ability of the Company’s reservoir engineering specialists and their relationship

to the Company, made inquiries of those reservoir engineers regarding the process followed and judgments made to estimate the Company’s

proved reserve volumes, and read the reserve report prepared by the Company’s specialists.

the extent key, sensitive inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions

are derived from the Company’s accounting records, such as commodity pricing, historical pricing differentials, operating costs,

estimated capital costs and working and net revenue interests, we tested management’s process for determining the assumptions,

including examining the underlying support, on a sample basis.

Specifically, our audit procedures involved testing management’s

assumptions as follows:

the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the

current year and examined contractual support for the pricing differentials;

current year;

the models used to estimate the operating costs at year-end compared to historical operating costs;

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the working and net revenue interests used in the reserve report by inspecting a sample of ownership interests, historical pricing

differentials, and operating costs to underlying support from the Company’s accounting records.

the Company’s evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining

historical conversion rates and support for the Company’s or the operator’s intent to develop the proved undeveloped

differentials, and operating costs to underlying support from the Company’s accounting records;

the Company’s evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining

historical conversion rates and support for the Company’s or the operator’s intent to develop the proved undeveloped

analytical procedures to the reserve report by comparing to historical actual results and to the prior year reserve report.

WEAVER AND TIDWELL, L.L.P.

have served as the Company’s auditor since 2017.

June 25, 2021

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

have served as the Company’s auditor since 2017.

Energy Corporation and Subsidiaries

BALANCE SHEETS

March 31, 2022

March 31, 2021

Current assets

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Other noncurrent assets

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

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Commitments and contingencies

Stockholders’

Stockholders’ equity

Preferred stock - $ 1.00 par value;

10,000,000 shares authorized;

none outstanding

Common stock - $ 0.50 par value;

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Treasury stock, at cost ( 67,000 shares)

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes to the consolidated financial statements are an integral part of these statements.

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended March 31,

Energy Corporation and Subsidiaries

STATEMENTS OF OPERATIONS

ended March 31,

Operating revenues:

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Total operating expenses

Operating income (loss)

Operating income

Other income (expenses):

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Net other expense

Income (loss) before provision for income taxes

Net income (loss)

Income (loss) per common share:

Income before provision for income taxes

Income per common share:

Weighted average common shares outstanding:

accompanying notes to the consolidated financial statements are an integral part of these statements.

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

Years ended March 31, 2021 and 2020

Common Stock Par Value

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Stockholders’

Energy Corporation and Subsidiaries

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

ended March 31, 2022 and 2021

Stockholders’

Balance at April 1, 2020

$ ( 346,001 )

Issuance of stock through options exercised

Stock based compensation

Balance at March 31, 2021

$ ( 346,001 )

Beginning Balance

$ ( 346,001 )

Issuance of stock through options exercised

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Balance at March 31, 2022

$ ( 346,001 )

Ending Balance

$ ( 346,001 )

SHARE ACTIVITY

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accompanying notes to the consolidated financial statements are an integral part of these statements.

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended March 31,

Energy Corporation and Subsidiaries

STATEMENTS OF CASH FLOWS

ended March 31,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation

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Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

Decrease in right-of-use asset

Decrease in prepaid expenses

Decrease in other assets

Increase (decrease) in accounts payable and accrued expenses

Decrease in operating lease liability

Increase in accounts receivable

(Increase) decrease in right-of-use asset

(Increase) decrease in prepaid expenses

Increase in accounts payable and accrued expenses

Increase (decrease) in operating lease liability

Settlement of asset retirement obligations

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Additions to oil and gas properties

( 1,888,695 )

( 1,592,023 )

Additions to other property and equipment

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Net cash used in investing activities

( 1,710,024 )

( 1,387,624 )

Cash flows from financing activities:

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Proceeds from PPP loan

Debt issuance costs

Reduction of long-term debt

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

( 1,455,000 )

Net cash (used in) provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Asset retirement obligations

Operating lease –

right of use asset and associated liabilities

Operating lease – right of use asset and associated liabilities

accompanying notes to the consolidated financial statements are an integral part of these statements.

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Energy Corporation (a Colorado corporation) and its wholly owned subsidiaries, Forman Energy Corporation (a New York corporation), Southwest

Texas Disposal Corporation (a Texas corporation) and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”)

are engaged in the exploration, development and production of crude oil, natural gas, condensate and natural gas liquids (“NGLs”).

Most of the Company’s oil and gas interests are centered in West Texas and Southeastern New Mexico;

however, the Company owns producing

properties and undeveloped acreage in fourteen states.

All of the Company’s oil and gas interests are operated by others.

Texas Disposal Corporation (a Texas corporation) and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”)

are engaged in the acquisition, exploration, development and production of crude oil, natural gas, condensate and natural gas

liquids (“NGLs”).

Most of the Company’s oil and gas interests are centered in West Texas and Southeastern New Mexico;

however, the Company owns producing properties and undeveloped acreage in fourteen states.

All of the Company’s oil and gas interests

are operated by others.

Summary of Significant Accounting Policies

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and Assumptions .

In preparing financial statements in conformity with accounting principles generally accepted in the United States

of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported

amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses

during the reporting period.

In addition, significant estimates are used in determining proved oil and gas reserves.

Although management

believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates.

The estimate of the

Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment of oil and

gas properties, is the most significant of the estimates and assumptions that affect these reported results.

In preparing financial statements

in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required

to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the

consolidated financial statements and affect the reported amounts of revenues and expenses during the reporting period.

significant estimates are used in determining proved oil and gas reserves.

Although management believes its estimates and assumptions

are reasonable, actual results may differ materially from those estimates.

The estimate of the Company’s oil and natural gas reserves,

which is used to compute depreciation, depletion, amortization and impairment of oil and gas properties, is the most significant of the

estimates and assumptions that affect these reported results.

and Cash Equivalents .

The Company considers all highly liquid debt instruments purchased with maturities of three months or less

and money market funds to be cash equivalents.

The Company maintains cash in bank deposit accounts that may, at times, exceed federally

insured limits.

At March 31, 2021, the Company had all of its cash and cash equivalents with one financial institution.

The Company has

not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

The Company considers all

highly liquid debt instruments purchased with maturities of three months or less and money market funds to be cash equivalents.

maintains cash in bank deposit accounts that may, at times, exceed federally insured limits.

At March 31, 2022, the Company had on

deposit all of its cash and cash equivalents with one financial institution.

The Company has not experienced any losses in such accounts

and believes it is not exposed to any significant credit risk.

Accounts receivable includes trade receivables from joint interest owners and oil and gas purchasers.

Credit is extended

based on an evaluation of a customer’s financial condition and, generally, is uncollateralized.

Accounts receivable under joint

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The allowance for doubtful accounts is determined based

on the Company’s previous loss history.

The Company has not experienced any significant credit losses.

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The carrying amount of oil and gas properties also

includes estimated asset retirement costs recorded based on the fair value of the asset retirement obligation (“ARO”) when

Generally, no gains or losses are recognized on the sale or disposition of oil and gas properties.

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The amount of

any impairment is transferred to the capitalized costs being amortized (the depreciation, depletion and amortization (“DD&A”)

Impairments transferred to the DD&A pool increase the DD&A rate.

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as an expense reflected in additional accumulated DD&A.

This is called a “ceiling limitation write-down.”

This impairment

to our oil and gas properties does not impact cash flow from operating activities, but does reduce stockholders’

equity and reported

This is called a “ceiling limitation write-down.” This impairment

to our oil and gas properties does not impact cash flow from operating activities, but does reduce stockholders’ equity and reported

Depreciation,

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on estimated useful lives of three to ten years .

(Loss) Per Common Share .

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number

of common shares outstanding during the period.

Diluted net income (loss) per share assumes the exercise of all stock options having

exercise prices less than the average market price of the common stock during the period using the treasury stock method and is computed

by dividing net income (loss) by the weighted average number of common shares and dilutive potential common shares (stock options) outstanding

Per Common Share .

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding

during the period.

In periods where losses are reported, the weighted-average number of common shares outstanding excludes potential

common shares, because their inclusion would be anti-dilutive.

Diluted net income per share assumes the exercise of all stock options having exercise prices less than the average

market price of the common stock during the period using the treasury stock method and is computed by dividing net income by the weighted

average number of common shares and dilutive potential common shares (stock options) outstanding during the period.

In periods where

losses are reported, the weighted-average number of common shares outstanding excludes potential common shares, because their inclusion

would be anti-dilutive.

Recognition - Revenue from Contracts with Customers .

Revenues from our royalty and non-operated working interest properties are recorded

under the cash receipts approach as directly received from the remitters’

statement accompanying the revenue check.

under the cash receipts approach as directly received from the remitters’ statement accompanying the revenue check.

Since the revenue

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historically have not been significant.

Company records transportation and processing costs that are incurred after control of its product has transferred to the customer as

a reduction of “Natural gas sales”

on the Consolidated Statement of Operations.

Gas imbalances are accounted for under the sales method whereby revenues are recognized based on production sold.

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Statements of Operations based on a graded-vesting schedule over the vesting period.

Investments .

The Company accounts for investments of less than 1% in limited liability companies at cost.

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Financial Instruments .

The Company’s derivative financial instruments are used to manage commodity price risk attributable

to expected oil and gas production.

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consolidated statements of cash flows.

Company uses certain pricing models to determine the fair value of its derivative financial instruments.

Inputs to the pricing models

include publicly available prices and forward price curves generated from a compilation of data gathered from third parties.

management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other

pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets.

Accounting Pronouncements.

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes (Topic

Simplifying the Accounting for Income Taxes”

(“ASU 2019-12”), which simplifies various aspects of the income

tax accounting guidance in ASC 740, including requirements related to the following:

(i) hybrid tax regimes;

(ii) the tax basis step-up

in goodwill obtained in a transaction that is not a business combination;

(iii) separate financial statements of entities not subject

(iv) the intraperiod tax allocation exception to the incremental approach;

(v) ownership changes in investments - changes from

a subsidiary to an equity method investment (and vice versa);

(vi) interim-period accounting for enacted changes in tax laws;

the year-to-date loss limitation in interim-period tax accounting.

ASU 2019-12 is effective for fiscal years beginning after December

15, 2020, and interim periods within those fiscal years and early adoption is permitted.

If an entity early adopts these amendments in

an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period.

an entity that elects to early adopt ASU 2019-12 is required to adopt all of the amendments in the same period.

The Company adopted ASU

2019-12 on April 1, 2021 and it will not have a material impact on its financial position, results of operations and disclosures.

and Capital Resources .

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Fair Value of Financial Instruments

Company applies FASB ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), which establishes a framework

for measuring fair value based upon inputs that market participants use in pricing an asset or liability, which are classified into two

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Observable inputs represent market data obtained from independent sources, whereas

unobservable inputs reflect a company’s own market assumptions, which are used if observable inputs are not reasonably available

without undue cost and effort.

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Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are

and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

at the measurement date and for the anticipated term of the instrument.

quoted prices for

identical or similar instruments in markets that are not active;

and model-derived valuations in which all significant inputs and

significant value drivers are observable in active markets at the measurement date and for the anticipated term of the

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset

or liability acquired, based on the best information available in the circumstances.

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interest rates do not significantly differ from current rates offered for instruments with similar characteristics.

See the Company’s

Note 5 on Long Term Debt for further discussion.

Value Measurements on a Recurring Basis

financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the

fair value measurement.

Company’s commodity derivative instruments were carried at fair value on a recurring basis in the Company’s consolidated

balance sheets.

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Assumed credit

risk adjustments, based on published credit ratings and public bond yield spreads are applied to the Company’s commodity derivatives.

The Company’s derivative instruments are subject to netting arrangements and qualify for net presentation in the consolidated balance

risk adjustments, based on published credit ratings and public bond yield spreads are applied to the Company’s commodity derivatives.

The Company’s derivative instruments are subject to netting arrangements and qualify for net presentation in the consolidated balance

sheets in those instances where such arrangements exist with the respective counterparty.

these derivative instruments are recorded at fair value, valuation adjustments may be required to reflect the creditworthiness of

either party as well as market constraints on liquidity.

ensure these derivative instruments are recorded at fair value, valuation adjustments may be required to reflect the creditworthiness

of either party as well as market constraints on liquidity.

There was no adjustment as of March 31, 2022.

Value Measurements on a Nonrecurring Basis

asset retirement obligation estimates are derived from historical costs and management’s expectation of future cost environments

and, therefore, the Company has designated these liabilities as Level 3 measurements.

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include estimates of plugging, abandonment and remediation costs, well life, inflation and credit-adjusted risk-free rate.

for a reconciliation of the beginning and ending balances of the liability for the Company’s asset retirement obligations.

Derivative Financial Instruments

is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions

deemed by management as competent and competitive.

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Derivative contracts are

utilized to economically hedge the Company’s exposure to price fluctuations and reduce the variability in the Company’s cash

flows associated with anticipated sales of future oil and natural gas production.

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and Hedging (ASC Topic 815), to account for its derivative financial instruments.

Company’s crude oil derivative positions consisted of put options.

The Company has elected not to designate any of its derivative

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in July and August 2020.

following tables summarizes the amounts of the Company’s realized and unrealized losses on derivative contracts listed as loss

on derivative instruments in the Company’s consolidated statements of operations for the year ended March 31, 2021.

following tables summarizes the amounts of the Company’s realized and unrealized losses on derivative contracts listed as loss

on derivative instruments in the Company’s consolidated statements of operations for the year ended March 31, 2021.

Summary of Realized and Unrealized Losses On Derivative Contracts

Loss Recognized

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debt on the Consolidated Balance Sheets consisted of the following as of March 31:

Schedule of Long-Term Debt

Credit facility

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Total long-term debt

On December 28, 2018, the Company entered into a loan

agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which provided for a credit facility of $1,000,000

with a maturity date of December 28, 2021.

The Agreement has no monthly commitment reduction and a borrowing base to be evaluated annually.

the current period, since the Company has no long-term debt outstanding, unamortized debt issuance costs in the amount of $ 12,526

are included in Other noncurrent assets.

December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”),

which originally provided for a credit facility of $ 1,000,000 with a maturity date of December 28, 2021 .

The Agreement has no monthly

commitment reduction and a borrowing base to be evaluated annually.

February 28, 2020, the Agreement was amended to increase the credit facility to $ 2,500,000 , extend the maturity date to March 28, 2023

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As of March 31,

2021, there was $320,000 available on the facility.

2022, there was $ 1,500,000 available for borrowing by the Company on the facility.

principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2023 .

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also deferred over the life of the credit facility.

borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially

all of the Company’s oil and gas properties.

borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially

all of the Company’s oil and gas properties.

Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of

1 unchanged sentence

The Company is also obligated to meet certain financial covenants under the Agreement and requires

senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less

than or equal to 4.00 to 1.00 measured with respect to the four trailing fiscal quarters and minimum interest coverage ratios (EBITDA/Interest

3 unchanged sentences

The Company obtained written permission from WTNB prior to entering into the current hedge agreement discussed in Note 4.

balance outstanding on the credit facility as of March 31, 2021 was $1,180,000.

The following table is a summary of activity on the WTNB

credit facility for the years ended March 31, 2021 and 2020:

was no balance outstanding on the credit facility as of March 31, 2022.

The following table is a summary of activity on the WTNB credit

facility for the years ended March 31, 2022 and 2021:

Summary of Line of Credit Activity

Balance at April 1, 2020:

1 unchanged sentence

Balance at March 31, 2022:

Subsequently,

the Company has borrowed $100,000 and made payments totaling $480,000, leaving a balance of $800,000 as of June 21, 2021.

Company also maintained a Certificate of Deposit Account at WTNB to collateralize one outstanding letter of credit for $25,000 in lieu

of a plugging bond with the Texas Railroad Commission covering the properties the Company operates.

This operated property was sold effective

December 1, 2019 and the letter of credit was cancelled.

On April 10, 2020, the Certificate of Deposit Account was terminated and the

funds deposited into the Company’s operating account.

Asset Retirement Obligations

Company’s asset retirement obligations relate to the plugging of wells, the removal of facilities and equipment, and site restoration

on oil and gas properties.

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following table provides a rollforward of the asset retirement obligations for fiscal years ended March 31:

Schedule of Rollforward of Asset Retirement Obligations

Carrying amount of asset retirement obligations, beginning of year

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federal and state income tax jurisdictions is 2017.

December 22, 2017, the tax legislation referred to as the 2017 Tax Reform Act (“Tax Cuts and Jobs Act”) was enacted.

more significant changes that impact the Company are the reduction in the corporate federal income tax rate from 35% to 21%.

April 1, 2018, our corporate federal statutory income tax rate is 21%.

GAAP requires deferred income tax assets and liabilities to be

measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled.

components of net deferred tax assets (liabilities) at March 31 are as follows:

requires deferred income tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences

are to be realized or settled.

Significant components of net deferred tax assets (liabilities) at March 31 are as follows:

Schedule of Components of Net Deferred Tax Assets (Liabilities)

Deferred tax assets:

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Net operating loss

Total deferred tax assets

Deferred tax liabilities:

2 unchanged sentences

Valuation allowance

( 1,258,401 )

Net deferred tax

2 unchanged sentences

will begin expiring in 2033 .

The Company’s ability to use some of its net operating loss carryforwards and certain other tax attributes

to reduce current and future U.S.

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reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for years ended March 31 follows:

Schedule of Reconciliation of Provision for Income Taxes

Tax expense at federal statutory rate (1)

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federal statutory rate was 21 % for fiscal years ending March 31, 2022 and 2021.

the years ended March 31, 2021 and 2020, the Company did not have any uncertain tax positions.

the years ended March 31, 2022 and 2021, the Company did no t

have any uncertain tax positions.

the amount of unrecognized tax benefits may change in the next 12 months, the Company does not expect any change to have a significant

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a net deferred tax asset position for years ending March 31, 2022 and 2021.

Our deferred tax asset is $1,258,401 as of March 31, 2021

with a valuation amount of $1,258,401.

We believe it is more likely than not that these deferred tax assets will not be realized.

assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit

the use of deferred tax assets.

The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of

future taxable income are increased or if objective negative evidence in the form of cumulative losses is no longer present and additional

weight is given to subjective evidence such as expected future growth.

December 2020, the President of the United States signed the Consolidated Appropriations Act, 2021 (“the Act”).

The Act includes

many tax provisions, including the extension of various expiring provisions, extensions and expansions of certain earlier pandemic tax

relief provisions, among other things.

The Act did not have a material impact on the Company’s current year tax provision or the

Company’s consolidated financial statements.

March 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

to stabilize the economy during the coronavirus pandemic.

The CARES Act temporarily suspends and modifies certain tax laws established

by the 2017 Tax Cuts and Jobs Act, including, but not limited to, modifications to net operating loss limitations, business interest

limitations and alternative minimum tax.

The CARES Act did not have a material impact on the Company’s current year provision and

the Company’s consolidated financial statements.

Our deferred tax asset is $ 753,490

as of March 31, 2022 with a valuation amount

of $ 753,490 .

We believe it is more likely than not that these

deferred tax assets will not be realized.

Management considers the likelihood that the Company’s net operating losses and other

deferred tax attributes will be utilized prior to their expiration, if applicable.

The determination to record a valuation allowance

was based on management’s assessment of all available evidence, both positive and negative, supporting realizability of the Company

deferred tax asset as required by applicable accounting standards.

In light of those criteria for recognizing the tax benefit of deferred

tax assets, the Company’s assessment resulted in application of a valuation allowance against the deferred tax asset as of March

Major Customers

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significant credit losses on its oil and gas accounts and management is of the opinion that significant credit risk does not exist.

is of the opinion that the loss of any one purchaser would not have an adverse effect on the Company’s ability to sell its oil

and gas production.

fiscal 2021, one customer accounted for 66% of the total oil and natural gas revenues and 71% of the total oil and natural gas accounts

In fiscal 2020, one customer accounted for 52% of the total oil and natural gas revenues and 63% of the total oil and natural

gas accounts receivable.

fiscal 2022, one purchaser accounted for 67 %

of the total operating revenues and 60 %

of the total oil and natural gas accounts receivable.

In fiscal 2021, one purchaser accounted for 66 %

of the total operating revenues and 71 %

of the total oil and natural gas accounts receivable.

Oil and Natural Gas Costs

costs related to the Company’s oil and natural gas activities were incurred as follows for the years ended March 31:

Schedule of Cost Related to Oil and Gas Activities

Property acquisition costs:

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Company had the following aggregate capitalized costs relating to its oil and gas property activities at March 31:

Schedule of Aggregate Capitalized Costs Relating Oil and Gas Property Activities

Proved oil and gas properties

2 unchanged sentences

not subject to amortization

Oil and gas properties, gross

Less accumulated DD&A

Total oil and gas properties

amounted to $ 10.57 and $ 8.68 per BOE of production for the years ended March 31, 2022 and 2021, respectively.

Income (Loss) Per Common Share

Income Per Common Share

following is a reconciliation of the number of shares used in the calculation of basic income per share and diluted income per share

for the years ended March 31:

Net income (loss)

Schedule of Reconciliation of Basic and Diluted Net Income (loss) Per Share

Shares outstanding:

Weighted avg.

common shares outstanding –

common shares outstanding – basic

Effect of the assumed exercise of dilutive stock options

Weighted avg.

common shares outstanding –

Income (loss) per common share:

the year ended March 31, 2021, no anti-dilutive shares relating to stock options were excluded from the computation of diluted net income.

Due to a net loss for the year ended March 31, 2020, the weighted average number of common shares outstanding excludes common stock equivalents

because their inclusion would be anti-dilutive.

Stockholders’

September 2020, the Board of Directors authorized the use of up to $250,000 to repurchase shares of the Company’s common stock

common shares outstanding – dilutive

Income per common share:

the year ended March 31, 2022, 31,000 shares relating to stock options were excluded from the computation of diluted net income because

their inclusion would be anti-dilutive.

Anti-dilutive stock options have a weighted average exercise price of $ 8.51 at March 31, 2022.

For the year ended March 31, 2021, no anti-dilutive shares relating to stock options were excluded from the computation of diluted net

Stockholders ’ Equity

Stockholders’ Equity

September 2021, the Board of Directors authorized the use of up to $ 250,000 to repurchase shares of the Company’s common stock

for the treasury account.

1 unchanged sentence

Stock-based Compensation

September 2019, the Company adopted the 2019 Employee Incentive Stock Plan (the “2019 Plan”).

The 2019 Plan provides for

11 unchanged sentences

ten years from the date of adoption.

According to the Company’s employee stock incentive plan, new shares will be issued upon the

exercise of stock options and the Company can repurchase shares exercised under the plan.

the year ended March 31, 2021, there were no stock options issued.

During the year ended March 31, 2020, the Compensation Committee of

the Board of Directors approved and the Company issued options covering 42,000 shares of stock.

The plan also provides for the granting

of stock awards.

No stock awards were granted during fiscal 2021 and 2020.

the year ended March 31, 2022, the Compensation Committee of the Board of Directors approved and the Company granted 31,000 stock options.

During the year ended March 31, 2021, there were no stock options granted.

The plan also provides for the granting of stock awards.

stock awards were granted during fiscal 2022 and 2021.

Company recognized compensation expense of $ 87,573 and $ 55,678 related to vesting stock options in general and administrative expense

4 unchanged sentences

Expected volatilities are based

on historical volatility of the Company’s stock over the contractual term of 120 months and other factors.

The Company uses historical

6 unchanged sentences

Actual value realized, if any, is

dependent on the future performance of the Company’s common stock and overall stock market conditions.

There is no assurance the

3 unchanged sentences

All such amounts represent the weighted average amounts for each period.

Summary of Grant-date Fair Value of Stock Options Granted and Assumptions Used Binomial Models

For the year ended March 31,

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forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history for these types of

During the year ended March 31, 2021, 1,000 unvested stock options were forfeited due to the resignation of an employee and 34,200

vested stock options expired unexercised.

During the year ended March 31, 2022, there were no stock options forfeited or expired.

During the year ended March 31, 2021,

1,000 unvested stock options were forfeited due to the resignation of an employee and 34,200 vested stock options expired unexercised.

following table is a summary of activity of stock options for the years ended March 31, 2022 and 2021:

Weighted Average

Summary of Activity of Stock Options

Exercise Price

Aggregate Average Remaining Contract Life

at April 1, 2019

at March 31, 2020

at March 31, 2021

Weighted Aggregate

Average Remaining Contract Life

Outstanding at April 1, 2020

Forfeited or Expired

Outstanding at March 31, 2021

Forfeited or Expired

Outstanding at March 31, 2022

Vested at March 31, 2022

Exercisable at March 31, 2022

the year ended March 31, 2022, stock options covering 72,750 shares were exercised with a total intrinsic value of $ 588,889 .

received proceeds of $ 458,570 from these exercises.

During the year ended March 31, 2020, no stock options were exercised.

During the year ended March 31, 2021, stock options covering 36,500 shares were exercised

with a total intrinsic value of $ 72,981 .

The Company received proceeds of $ 247,435 from these exercises.

information pertaining to option activity was as follows during the year ended March 31:

Weighted average grant-date fair value of stock options granted (per share)

Schedule of Other Information Pertaining to Option Activity

Weighted average grant-date fair value of stock

options granted (per share)

Total fair value of options vested

1 unchanged sentence

following table summarizes information about options outstanding at March 31, 2022:

Summary of Information About Options Outstanding

Range of Exercise Prices

Number of Options

Weighted Average Exercise Price

Weighted Average Remaining Contract Life in Years

Aggregate Intrinsic Value

$ 3.34 –

options at March 31, 2021 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00.

Exercise Price

Weighted Average

Contract Life in

$ 3.34 – 4.83

$ 3.34 – 8.51

options at March 31, 2022 expire between August 1, 2024 and July 2031 and have exercise prices ranging from $ 3.34 to $ 8.51 .

Related Party Transactions

7 unchanged sentences

2021 were $ 15,775 and $ 16,549 , respectively.

March 2020, the Company entered into an agreement with our principal shareholder, Nicholas C.

Taylor for the sale of surface rights to

an undivided interest of 1.98 acres in a 160-acre tract of rural land located in Brazoria County, Texas.

Taylor paid the company

approximately $18,000 in cash for these rights, such price being based on a November 22, 2019 appraisal by a firm of MAI appraisers at

$9,000 per acre.

Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for the corporate office located

1 unchanged sentence

This includes 1,112 square feet of office space shared with and reimbursed by the majority shareholder.

is a 36-month lease that expired in May 2021 and does not include an option to renew.

In June 2020, in exchange for a reduction in rent

for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly

rate extending its current lease expiration date to July 2021.

does not include an option to renew and is a 36 -month lease that was to expire in May 2021.

In June 2020, in exchange for a reduction

in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular

monthly rate extending its current lease expiration date to July 2021 .

In June 2021, the Company agreed to extend its current lease at

a flat (unescalated) rate for 36 months.

The amended lease now expires on July 31, 2024 .

Company determines an arrangement is a lease at inception.

1 unchanged sentence

lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.

lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent

its obligation to make lease payments arising from the lease.

1 unchanged sentence

date based on the present value of lease payments over the lease term.

As the Company’s lease does not provide an implicit rate,

the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value

1 unchanged sentence

The incremental borrowing rate used at adoption was 3.75 %.

Significant judgement is required when determining the incremental

borrowing rate.

The Company chose not to discount because the difference is not significant.

Rent expense for lease payments is recognized

on a straight-line basis over the lease term.

Significant judgement is required when determining the

incremental borrowing rate.

Rent expense for lease payments is recognized on a straight-line basis over the lease term.

balance sheets classification of lease assets and liabilities was as follows:

lease right-of-use asset, beginning balance

period amortization

operating lease right-of-use asset

lease liability, current

lease liability, long term

lease liabilities

Schedule of Operating Lease Assets and Liabilities

March 31, 2022

Operating lease right-of-use asset, beginning balance

Current period amortization

Lease amendment

Total operating lease right-of-use asset

Operating lease liability, current

Operating lease liability, long term

Total lease liabilities

minimum lease payments as of March 31, 2022 under non-cancellable operating leases are as follows:

Schedule of Future Minimum Lease Payments

Lease Obligation

1 unchanged sentence

Fiscal Year Ended March 31, 2024

Fiscal Year Ended March 31, 2025

Total lease payments

3 unchanged sentences

Operating lease liability, long term

cash paid for our operating lease for the year ended March 31, 2021 and 2020 was $48,360 and $46,447, respectively.

Rent expense, less

sublease income of $19,109 and $18,234, respectively, is included in general and administrative expenses.

Subsequently,

in June 2021, the Company agreed to extend its current lease for its principal office space located at 415 West Wall Street, Suite 475,

Midland, Texas 79701 for 36 months.

The amended lease now expires on July 31, 2024.

cash paid for our operating lease for the year ended March 31, 2022 and 2021 was $ 42,237

and $ 48,860 ,

respectively.

Rent expense, less sublease income

of $ 18,555 and

respectively, is included in general and administrative

Paycheck Protection Program (PPP) Loan.

1 unchanged sentence

One component

of the CARES Act was the paycheck protection program (“PPP”) which provides small businesses with the resources needed to

of the CARES Act was the paycheck protection program (“PPP”) which provided small businesses with the resources needed to

maintain their payroll and cover applicable overhead.

The PPP is implemented by the United States Small Business Administration (“SBA”)

The PPP was implemented by the United States Small Business Administration (“SBA”)

with support from the Department of the Treasury.

The PPP provides funds to pay up to 24 weeks of payroll costs including benefits.

can also be used to pay interest on mortgages, rent, and utilities.

The PPP provided funds to pay up to 24 weeks of payroll costs including benefits.

could also be used to pay interest on mortgages, rent, and utilities.

The Company applied for, and was accepted to participate in this

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Oil and Gas Reserve Data (Unaudited)

estimates of the Company’s proved oil and gas reserves, which are located entirely within the United States, were prepared in accordance

with the generally accepted petroleum engineering and evaluation principles and definitions and guidelines established by the SEC.

12 unchanged sentences

as additional information becomes available in the future.

following table summarizes the prices utilized in the reserve estimates for 2021 and 2020.

Commodity prices utilized for the reserve

estimates prior to adjustments for location, grade and quality are as follows:

following table presents the weighted average first-day-of-the-month prices used for oil and gas reserve preparation, based upon SEC

Schedule of Changes in Proved Reserve

Prices utilized in the reserve estimates before adjustments:

Natural gas per MMBtu

Company’s total estimated proved reserves at March 31, 2021 were approximately 1.504 MBOE of which 49% was oil and natural gas

liquids and 51% was natural gas.

Company’s total estimated proved reserves at March 31, 2022 were approximately 1.616

MBOE of which 50 %

was oil and natural gas liquids and 50 %

was natural gas.

in Proved Reserves :

Schedule of Changes in Proved Reserve

Proved Developed and Undeveloped Reserves:

12 unchanged sentences

Proved undeveloped reserves

(“PUD”) are proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells

where a relatively major expenditure is required for recompletion within five years of the date of their initial recognition.

1 unchanged sentence

five-year timeframe.

Such downward revisions are primarily the result of reserves written off due to the five-year limitation.

primarily working interests in a unit in the Wolfcamp B Zone in Upton and Reagan Counties, Texas which are on a lease held by production

and still in place to be developed in the future.

Such downward revisions are primarily the result of reserves written off due to the five-year limitation and the

change in the timing of new development.

They are primarily working interests on a lease in Reagan County, Texas which are held by production

and still in place to be developed in the future and royalty interests on a lease held by production in Upton County, Texas.

of Proved Developed and Undeveloped Reserves as of March 31, 2022 and 2021 :

Developed Reserves:

of April 1, 2019

of March 31, 2020

of March 31, 2021

Undeveloped Reserves:

of April 1, 2019

of March 31, 2020

of March 31, 2021

March 31, 2021, the Company reported estimated PUDs of 484 MBOE, which accounted for 32% of its total estimated proved oil and gas reserves.

This figure primarily consists of a projected 121 new wells (263 MBOE) operated by others, 7 wells are currently being drilled with plans

for 60 wells to follow in 2022, 48 wells in 2023 and 6 wells in 2024.

The cost of these projects would be funded, to the extent possible,

from existing cash balances, cash flow from operations and bank borrowings.

The remainder may be funded through non-core asset sales

and/or sales of our common stock.

following table discloses the Company’s progress toward the conversion of PUDs during fiscal 2021.

Summary of Proved Developed and Undeveloped Reserves

Proved Developed Reserves:

As of April 1, 2020

As of March 31, 2021

As of March 31, 2022

Proved Undeveloped Reserves:

As of April 1, 2020

As of March 31, 2021

As of March 31, 2022

March 31, 2022, the

Company reported estimated PUDs of 590 MBOE, which accounted for 37 %

of its total estimated proved oil and gas reserves.

This figure primarily consists of a projected 97

new wells (364 MBOE) operated by others, 26

wells are currently being drilled with plans for 35

wells to follow in fiscal 2023, 17

wells in fiscal 2024 and 19

wells in fiscal 2025 .

The cost of these projects would be funded, to the extent possible, from existing cash balances, cash

flow from operations and bank borrowings.

The remainder may be funded through non-core asset sales and/or sales of our common

following table discloses the Company’s progress toward the conversion of PUDs during fiscal 2022.

of Converting Proved Undeveloped Reserves :

Schedule of Progress of Converting Proved Undeveloped Reserves

Oil & Natural Gas

7 unchanged sentences

future net cash flows represent an estimate of future net revenues from the production of proved reserves using average prices for 2022

and 2020 along with estimates of the operating costs, production taxes and future development costs necessary to produce such reserves.

No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest expense.

and 2021 along with estimates of the operating costs, production taxes and future development costs necessary to produce such

No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest

costs and production taxes are estimated based on current costs with respect to producing oil and natural gas properties.

1 unchanged sentence

costs including abandonment costs are based on the best estimate of such costs assuming current economic and operating conditions.

future cash flows estimated to be spent to develop the Company’s share of proved undeveloped properties through March 31, 2024

future cash flows estimated to be spent to develop the Company’s share of proved undeveloped properties through March 31, 2025

are $ 6,512,956 .

24 unchanged sentences

of the fair value of proved oil and gas properties.

following information is based on the Company’s best estimate of the required data for the Standardized Measure of Discounted Future

Net Cash Flows as of March 31, 2021 and 2020 in accordance with ASC 932, “Extractive Activities –

Oil and Gas”

following information is based on the Company’s best estimate of the required data for the Standardized Measure of Discounted Future

Net Cash Flows as of March 31, 2022 and 2021 in accordance with ASC 932, “Extractive Activities – Oil and Gas” which

requires the use of a 10 % discount rate.

This information is not the fair market value, nor does it represent the expected present value

of future cash flows of the Company’s proved oil and gas reserves.

Measure of Discounted Future Net Cash Flows Relating to Proved Reserves:

Schedule of Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves

Future cash inflows

Future production costs and taxes

2 unchanged sentences

Future development costs

( 6,839,000 )

( 3,213,000 )

Future income taxes

( 8,586,000 )

( 1,714,000 )

Future net cash flows

1 unchanged sentence

( 19,900,000 )

( 9,206,000 )

Standardized measure of discounted future net cash flows

in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves:

Schedule of Changes in Standardized Measure of Discounted Future Net Cash Flows to Proved Oil and Gas Reserves

Sales of oil and gas produced, net of production costs

1 unchanged sentence

$ (1,902,000 )

Sales of oil and gas produced, net of production costs

$ ( 5,244,000 )

$ ( 1,902,000 )

Net changes in price and production costs

( 6,680,000 )

Changes in previously estimated development costs

Revisions of quantity estimates

( 2,594,000 )

( 5,954,000 )

Net change due to purchases and sales of minerals in place

1 unchanged sentence

Net change in income taxes

( 3,861,000 )

Accretion of discount

1 unchanged sentence

Changes in standardized measure

( 6,213,000 )

Standardized measure, beginning of year

1 unchanged sentence

Subsequent Events

the first quarter of fiscal 2022, the Company borrowed $100,000 on the credit facility and made payments totaling $480,000 on the credit

facility leaving a balance of $800,000.

the first quarter of fiscal 2022, the Company expended approximately $326,000 for participation in the drilling of eight wells and the

completion of six wells in Lea County, New Mexico.

June 2021, the Company agreed to extend its current lease for its principal office space located at 415 West Wall Street, Suite 475,

Midland, Texas 79701 for 36 months.

The amended lease now expires on July 31, 2024.

Articles of Incorporation of Mexco Energy Corporation filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K dated

May 4, 2022 the Company acquired various

royalty (mineral) interests in 22 wells and

several additional potential locations for development operated by Chesapeake Energy Corporation and located in the Eagleford

area of Dimmit County, Texas for a purchase price of $ 939,000 which

was effective April 1, 2022.

the first quarter of fiscal 2023, the Company expended approximately $ 237,000 to participate in the drilling of eight horizontal wells

in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico.

the first quarter of fiscal 2023, the Company expended approximately $ 657,000 to participate in the drilling of four horizontal wells

in the Wolfcamp Sand formation of the Midland Basin in Reagan County, Texas.

June 2022, the Company expended approximately $ 300,000 ,

representing one-half of the total estimated cost,

to participate in the drilling and completion of four horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy

County, New Mexico.

Company completed a review and analysis of all events that occurred after the consolidated balance sheet date to determine if any such

events must be reported and has determined that there are no other subsequent events to be disclosed.

Articles of Incorporation of Mexco Energy Corporation filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K dated

June 24, 1998, and incorporated herein by reference.

Amended Bylaws of Mexco Energy Corporation as amended on September 13, 2011 filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 14, 2011, and incorporated herein by reference.

2009 Employee Incentive Stock Plan of Mexco Energy Corporation filed as Exhibit A to the Company’s Proxy Statement on Form 14C dated July 15, 2009, and incorporated herein by reference.

2019 Employee Incentive Stock Plan of Mexco Energy Corporation filed as Exhibit A to the Company’s Proxy Statement on Form 14C dated July 16, 2019, and incorporated herein by reference.

Loan Agreement dated December 28, 2018 between West Texas National Bank and Mexco Energy Corporation filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 31, 2018, and incorporated herein by reference.

2009 Employee Incentive Stock Plan of Mexco Energy Corporation filed as Exhibit A to the Company’s Proxy Statement on Form 14C dated July 15, 2009, and incorporated herein by reference.

2019 Employee Incentive Stock Plan of Mexco Energy Corporation filed as Exhibit A to the Company’s Proxy Statement on Form 14C dated July 16, 2019, and incorporated herein by reference.

First Amendment to Loan Agreement dated February 28, 2020 to the Loan Agreement between West Texas National Bank and Mexco Energy Corporation dated December 31, 2018, and incorporated herein by reference.

Code of Business Conduct and Ethics of Mexco Energy Corporation filed with the Company’s Quarterly Report on Form 10-Q filed on November 15, 2004, and incorporated herein by reference.

Subsidiaries of Mexco Energy Corporation

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Hall & Associates, Inc., Independent Petroleum Engineering Firm

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extenstion Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures